BMO: 5 Reasons To Buy Nutrien

After more than a full year on the sidelines, BMO Capital Markets found five reasons to turn bullish on Nutrien Ltd (NYSE: NTR), a provider of crop inputs and services that produces and distributes potash, nitrogen and phosphate products globally.

The Analyst

The Thesis

Investors seeking exposure to the fertilizer space have options, but with many stocks trading at similar multiples, Nutrien looks "relatively safer" for five reasons, Jackson said in a Monday upgrade note. They are:

The fertilizer space offers investors an "attractive shelter" within the materials sector, as it boasts lower economic sensitivity, the analyst said. It's also difficult to model crop prices dipping below current "challenged" levels, and they could see upside from a resolved trade deal with China, he said.

Higher fertilizer average selling prices could help Nutrien realize 30-percent earnings growth in 2019, Jackson said. The company is likely to continue its pace of share buybacks and repay $1 billion in debt this year, he said.

Nutrien's exposure to the nitrogen market is favorable from a supply-and-demand perspective and could help offset lower potash rates.

Nutrien's retail footprint remains a "stable anchor" and could maintain its 24-percent gross margin over the midterm, Jackson said, adding that the business could grow from acquisitions and tuck-in deals.

Nutrien "delivered on what it said it would deliver" throughout 2018, and there is no reason to believe the company can't duplicate its success in areas like synergies, stake sales, dividend and stock buybacks, according to BMO.

Price Action

Nutrien shares were down 0.87 percent at $49.01 at the time of publication Thursday.